Vijayawada/Hyderabad:

 Concerned over the pricing of drugs in inventories and on pharmacy shelves, the pharmaceuticals sector is bracing itself for the advent of the GST regime.

"There could be some issues on printing of MRP on packs that are lying with the companies. Hopefully, the government will not insist on their recall for overprinting of MRP," Udaya Bhaskar, director general of Hyderabad-based industry lobby Pharmexil said. Bhaskar said the pharmaceuticals industry does not see any adverse impact on exports this year. Both AP and Telangana are pharmaceutial export hubs, accounting for 30% of total manufacturing of bulk drugs from India.

Saumen Chakraborty, president and CFO of Dr Reddy’s said, "The short-term impact of GST on the pharma sector will probably be that stockists maintain only the required level of stock on June 30, due to their apprehension of losses resulting from a higher GST rate. This might impact sales and also result in some availability issues. While this is short-term phenomenon, the long-term overall impact on the sector is expected to be on a positive side. Since GST aims to bring uniformity in tax structure, coupled with tax transparency, it will go a long way in contributing to the GDP of the nation."

Under the new GST regime, the tax rates on most drugs were raised from 9% to 12%. But the GST on vital drugs like insulin had been reduced to 5%. Another issue that could bedevil the pharma sector is the status of samples given to physicians. The samples were not taxed earlier, so the sector is expecting clarity on this issue.

Meanwhile, other manufacturing sectors too are preparing for the dawn of the GST era, but with gritted teeth, as issues of heavy-handed government intervention for those not complying with the new tax regime’s requirements are yet to be resolved.

While the manufacturing sector has lingering doubts over possible government intervention, the sector has no immediate plans to suspend production or curtail supply.

According to J S R K Prasad, chairman of CII in Andhra Pradesh and owner of a specialty foundries company in Vijayawada, while GST was welcome, the next tax regime had a lot of "grey areas".

"We hope the government is open to feedback from the industry. One challenge before industry is the sheer amount of filing that needs to be done. Companies will need to file four reports with the tax authorities every months. That means filing 48 reports in a year, apart from the annual report, taking the total to 49," Prasad said. "Unlike earlier, the onus is one on the company to get the filing right the first time."

The plastics industry too has a major presence in Telangana, with over 3,000 firms in the marketplace. Of these, 90% are in the MSME category. The industry provides direct employment to over 2 lakh people and indirect employment to over 2.5 lakh people. Speaking about the plastics manufacturing sector, Anil Reddy Vennam, former president of The Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry (FTAPCCI) and technical director at Nayastrap Pvt Ltd pointed out that the industry is expected to suffer as many of the regular items such as plastics furniture, sharpners that are widely used by common people has been put under the highest tax bracket of 28%. Earlier, most of the plastics products used to be taxed between 5-15%.

Companies in the food sector, too, while welcoming the introduction of GST, had some caveats. "The existing billing and accounting software is not compatible to GST. The GST compatible software will be ready in a few days," says, P Chandrasekhara Reddy, vice-president, sales and marketing, at Gemini Edibles & Fats. "In the case of edible oils, the pre- and post-GST taxation rate is almost the same for AP and Telangana i.e., 5%, barring a few states like Orissa, Chhattisgarh and Karnataka. Hence, we do not expect any major slowdown in production. We believe that introduction of GST is good for our industry as it reduces the cost of operation and promotes borderless trade," Reddy said.

A senior official from the cement industry said the GST will not have much impact on the sector. "As cement industry, we supply to two segments -- trade (i.e. dealers) and non-trade (builders, government etc). In the trade segment, the cement industry will be gaining 2-3%, while in the non-trade segment, we will be losing around 5-6%. Overall, there is not going to be much impact. The industry will adjust in a month’s time." In the south, cement players have an installed capacity of around 150 million tonnes per annum. Due to sluggish demand, most of the cement manufacturers have been running at 50-60% in the region. Cement will attract 28% GST.

 22 Jun 2017, 06:25 AM